It’s time to stop talking about productivity. I realise this statement represents economic blasphemy of the highest order, on a par with the assertion that “that Adam Smith guy was a complete airhead, wasn’t he?”. But bear with me. There is no shortage of earnest economists and not-so-earnest business people calling for a renewed national debate about Australia’s flagging productivity performance. But to most of us, the suggestion sounds as exciting as a call for a vigorous debate about paint drying.
Calling on Australians to be more productive somehow makes it sound like we’re all drones – our sole purpose being to produce more and more. And this is completely the wrong impression to give.
Boosting productivity is actually all about producing more output from a given set of inputs, being labour and capital. If we produce more from a given set of tools and workers, we lift income and ultimately living standards.
The idea also – although we don’t seem to have cottoned on to it yet – opens up the exciting prospect of allowing us to work fewer hours while maintaining the same standard of living.
That’s the difference between just working harder and working smarter.
And that’s why business is being disingenuous when it blames the winding back of Work Choices – and, in particular, arrangements allowing individuals to bargain away rights to overtime loading – for Australia’s declining productivity. Working longer doesn’t help productivity a jot, it just means we produce more stuff.
Anyway, enough of this productivity talk.
My suggestion for those seeking reform is to at every instance replace the word “productivity” with “creativity”. We create, we produce; it’s all the same. The difference is where appeals to boost productivity fail to lift the spirits, we all intuitively want to be more creative.
The notion of creativity appeals to the more cerebral, rather than physical, aspects of increasing productivity and I think this is where the biggest productivity gains lie. (For the technical among us, the focus should be on labour productivity rather than total factor productivity, which also includes the efficiency with which labour and capital combine.)
Creativity and – dare I say it – imagination are the powers that let humans see the world in a way otherwise to how it is now. Imagination and creativity enable us to see how things might work better in the future.
Indeed, when you think about it, creativity often is not the result of divine inspiration, but the process of synthesising existing ideas and packaging them in new ways. Most great art, literature, film, paintings appeal to the same human emotions that have driven us for thousand of years: love, hope, fear, joy.
Creativity is often about seeing new links, reinventing new ways to express the same old themes. And that’s how productivity works, too. Both require the same conditions to flourish: the freedom to innovate, to try new things, the ability to fail.
Perhaps the most important reform to boost creativity is education, because it aids this process of seeing the world in a different way. It brings children up to speed with all the great ideas that have come before, opening the possibility that they will build on them and advance society’s stock of expertise.
We should, at the very least, be aiming to lift our public spending on education as a proportion of gross domestic product to at least the average of the 34 member countries of the Organisation for Economic Co-operation and Development of 6.1 per cent, compared with our 5.2 per cent. For a country that frequently frets about becoming just a quarry for China, this gap in education spending is crying out to be filled.
I would also rank reforms to encourage business to offer greater work flexibility and work-life balance as a crucial way of allowing creativity to flourish. Perhaps by limiting working hours, by going home on time, we open up the thinking space that allows us to be more productive during our work hours.
In this light, the business push to get more workers to work overtime is particularly misguided. Economists still debate the extent to which Australia even has a productivity “problem”. It is true that productivity growth appears to have peaked in the early 2000s. But economists argue over the extent to which this is simply due to the ramp-up in the investment phase of the mining boom, which will pay dividends later on.
Higher productivity – or, should I say, creativity – is the only path to higher living standards, at least in terms of the ability to purchase more goods and services. So policies that help to improve it should always be a priority.
But to get reform, you need an informed and interested public, one that will not fall into deep coma upon mention of the “p” word. In which case, reframing the national productivity debate in terms of boosting creativity would be a truly productive use of our time. Even Adam Smith might think so, and he was a pretty clever guy.